Brokers should seize teaching opportunities on credit: Xu

When is the last time you popped in to your local real estate office and explained the niceties of prepping potential homebuyers for alternative lending? For one broker, it is a chat that can not only build relationships, but a book of clients.

“I do seminars in realtors’ offices all the time,” says Christine Xu, a mortgage broker, private lender and advisory council member at Mortgage Architects – MoneyBroker in Markham, Ont. “That is what I try to do is educate the realtor when they have a client looking for a house, I explain how they can qualify their client.”

What is most important for alternative lending is the down payment, Xu told MortgageBrokerNews.ca.

“When the client has the down payment, and I teach how to calculate a regular interest payment to show them if they are able to afford it,” she says. “If the client is unable to afford it, then I’m not doing the client any favours.”

That is especially true today, Xu says, as low money downpayments are encouraging many to enter the housing market who will quickly find themselves mired in debt and struggling to pay huge monthly mortgages.

A true mortgage broker – who is acting on the client’s behalf as a financial advisor – will steer them clear of such future problems; especially for clients in the GTA, who are buying million-dollar homes with as little as a 5 per cent down payment.

“Alternative lending usually doesn’t go to 95 per cent financing,” she says, “a minimum should be 10 per cent – but even then, they should be able to demonstrate that they can afford it.”

After years of pressure from Ottawa to create more fiscally responsible Canadians, a tip of the cap should be given to the alternative lending space, says Xu, which – while providing loans to those who are being turned away from the prime space – are being groomed and taught by brokers and lenders alike to become better money managers.

“Credit is money. If you keep a good credit rating, you can have access to cheaper money,” says Xu. “Some try to argue that the annual fee on a credit card is $10 and they don’t want to pay that; ironically, they are paying many times more because their credit rating is horrible. That’s why I tell clients – pay your credit card on time.”